UpdateRepsol blasts Argentine YPF seizure, threatens legal action

MEDELLIN, Colombia (ICIS)--Repsol YPF, majority owner in YPF, said on Monday it plans full legal action against Argentina after the seizure of the company’s oil and gas production in Argentina.

“Repsol considers the announced measure to be manifestly unlawful and gravely discriminatory, that its public interest has in no way been justified and clearly contravenes the obligations undertaken by the republic of Argentina during the privatisation of YPF, breaching the most basic principles of legal certainty and of reliance by the international investment community,” the Spanish company said in a statement.

Repsol will carry out all pertinent legal actions to preserve the value of all its assets and the interests of all of its shareholders, the company said. Repsol owns a 57.43% stake in YPF, with a book value as of the close of 2011 of €4.122bn ($5.424bn)

Argentine President Cristina Fernandez de Kirchner seized control of YPF, the nation’s largest crude producer, ousting Spanish owner Repsol YPF amid escalating tensions and accusations of continued decline in oil and gas production and investments in the country.

Argentina took over management of YPF with immediate effect, replacing chief executive Sebastian Eskenazi with planning minister Julio De Vido, Kirchner said. The government will also send a bill to Congress to take a 51% stake in YPF, she said.

The takeover follows more than two months of government pressure on YPF, a unit of Spain’s Repsol YPF, to boost investment and output.

The stake in YPF would give the Argentine government access to its shale oil reserves and natural gas production.

Argentina has an estimated 774,000bn cubic feet (bcf) of technically recoverable reserves of natural gas, the third-largest behind China and the US, according to the US Energy Information Administration (EIA).

YPF said in February that the Vaca Muerta formation in southern Argentina holds at least 23bn bbl of oil, of which at least 13bn bbl belong to YPF, the company said.

Argentina is expropriating YPF for the “public good”, a government official said.

YPF’s output accounted for about 34% of the nation’s production in 2011, according to Argentina energy secretariat data.

YPF is also the country’s largest fuel retailer and refiner, with 52% of refining capacity and one of the largest petrochemical producers.

YPF owns several industrial sites, including La Plata in Buenos Aires, Lujan de Cuyo in the state of Mendoza and Plaza Huincul in the state of Neuquen. YPF also owns half of the Refinor plant in the northern state of Salta, according to YPF.

La Plata refinery accounts for 30% of Argentina’s refining capacity and has a capacity of about 251,600 bbl/day. The plant also produces base oils, lubricants and asphalt.

Lujan de Cuyo represents 17% of national refining capacity and has a processing capacity of about 141,000 bbl/day, according to Repsol. The Plaza Huincul plant has a capacity of 33,500 bbl/day.

The office of Cristina de Kirchner did not return phone calls or emails seeking further comment.